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The Correlation between External Audit and Financial Performance of Banks from Romania

Author

Listed:
  • Mariana Nedelcu (Bunea)

    (The Bucharest University of Economic Studies)

  • Marian Siminica

    (University of Craiova,)

  • Carmen ?urlea

    (The Bucharest University of Economic Studies)

Abstract

The audit function plays a particularly important role as part of the corporate mechanism, due to the extra value it provides with the corporate governance, which is why, over the years, this issue has been assiduously studied and became the topic of numerous studies and analyses. The objective of this article is to provide an analysis of the potential relationships between the quality of external audit (assessed through membership to the Big Four: the largest four auditing firms, namely PricewaterhouseCoopers, KPMG, Ernst & Young and Deloitte) and financial performance (assessed by profitability, assets quality and solvency) of the banking system in Romania. Hence, the authors tried to find answers, advocated by the results of the conducted empirical analysis, to the following questions: Does the quality of external audit affects the financial performance of banks in Romania? How is registered the added value of external audit quality at credit institutions level? In order to test the assumptions made, it was used a predominantly quantitative research methodology, which is based on a deductive statistical analysis. The starting point is agency theory, the main objective is to test and identify the potential cause-effect relationships, while analyzing their significance weight. As a result of this research, it can be concluded that there is a positive correlation between external audit quality and financial performance of the credit institutions in the Romanian banking system, although it is not a significant one.

Suggested Citation

  • Mariana Nedelcu (Bunea) & Marian Siminica & Carmen ?urlea, 2015. "The Correlation between External Audit and Financial Performance of Banks from Romania," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 17(S9), pages 1273-1273, November.
    • Handle: RePEc:aes:amfeco:v:s9:y:2015:i:17:p:1273
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    References listed on IDEAS

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    1. Chung, Richard & Firth, Michael & Kim, Jeong-Bon, 2002. "Institutional monitoring and opportunistic earnings management," Journal of Corporate Finance, Elsevier, vol. 8(1), pages 29-48, January.
    2. Chau, Gerald K. & Gray, Sidney J., 2002. "Ownership structure and corporate voluntary disclosure in Hong Kong and Singapore," The International Journal of Accounting, Elsevier, vol. 37(2), pages 247-265.
    3. Dulacha G. Barako & Phil Hancock & H. Y. Izan, 2006. "Factors Influencing Voluntary Corporate Disclosure by Kenyan Companies," Corporate Governance: An International Review, Wiley Blackwell, vol. 14(2), pages 107-125, March.
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    Cited by:

    1. Mikhail Kulapov & Yuriy Odegov & Vera Sidorova & Nikolay Sidorov & Elena Zotova, 2019. "Corporate Culture of Organization - Typical and Russian model with the Context of Its Risks and Implications," Montenegrin Journal of Economics, Economic Laboratory for Transition Research (ELIT), vol. 15(1), pages 215-226.
    2. Pompei MITITEAN, 2023. "The Relationship Between Corporate Governance Mechanisms and Financial Institution Performance. A COVID-19 Perspective," CECCAR Business Review, Body of Expert and Licensed Accountants of Romania (CECCAR), vol. 3(12), pages 55-65, December .
    3. Alina-Georgiana Motoi & Aurelia Dumitru, 2016. "The General Framework Of Accounting Within The Projects Financed From Structural Funds," Social Sciences and Education Research Review, Department of Communication, Journalism and Education Sciences, University of Craiova, vol. 3(2), pages 55-70, December.
    4. Boubacar Diallo, 2021. "Do National Cultures Matter for External Audits? Evidence from Eastern Europe and the Middle East," Journal of Business Ethics, Springer, vol. 172(2), pages 347-359, August.
    5. Scott Dell & Meena Subedi & Maxwell K. Hsu & Ali Farazmand, 2023. "The Independent Audit for Nonprofits: Does it Make a Difference?," Public Organization Review, Springer, vol. 23(4), pages 1437-1453, December.
    6. Mariana Bunea & Vasile Dinu, 2019. "The BASEL III impact on the Romanian Banks’s Solvency," Montenegrin Journal of Economics, Economic Laboratory for Transition Research (ELIT), vol. 15(1), pages 189-199.
    7. Dan Costin Nitescu & Valentin Murgu & Elena Diana Caprita, 2019. "Impact of Labor, FDI and R D on Business Sustainability," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 21(S13), pages 795-795, November.
    8. Nensi Xhani & Maria Andreia Iliescu (Ristea) & Marioara Avram & Magdalena Mihai, 2020. "Organization Of The Audit Process In Municipal Institutions: Case Study Albania," Annals of University of Craiova - Economic Sciences Series, University of Craiova, Faculty of Economics and Business Administration, vol. 2(48), pages 96-107, December.
    9. Bunea Mariana & Dobre Florin & Popa Adriana Florina & Sahlian Daniela Nicoleta, 2018. "Risk management, corporate governance and financial performance of the banking system in Romania," Proceedings of the International Conference on Business Excellence, Sciendo, vol. 12(1), pages 182-196, May.

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    More about this item

    Keywords

    audit quality; external audit; corporate governance; financial performance; solvency; banking system.;
    All these keywords.

    JEL classification:

    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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